Abstract:
Purpose – This paper aims to examine the role of country-level institutional structures in strengthening the
level of investor confidence in Africa while controlling for real GDP growth, interest rate spread, inflation and
country credit rating.
Design/methodology/approach – The paper uses panel data for the period 2009-2013. It takes into
account the rule of law, political stability, regulatory quality, voice and accountability, control of corruption
and property rights as potential institutional drivers of the level of investor confidence. These factors are
based on their relative relevance from the extant literature. Correlated panels-corrected standard errors model
was used to establish the relationship between the institutional structures and the strength of investor
confidence.
Findings – The overall results show that rule of law, voice and accountability, property rights and
political stability exhibit significant positive relationship with the strength of investor confidence in
African economies. This implies that asking African economies to strengthen these institutional
structures will result in enhanced investor confidence in their economies. This suggests that the
establishment of these institutional structures is an effective tool to enhance investor confidence in
African economies.
Practical implications – In addition to the long-term goal of promoting economic reforms, a
corresponding long-term goal of strengthening institutional structures in African economies should be taken
into consideration. Instead of waiting for their economic reforms to take effect, governments in African
countries can, to some degree, attract investors into their economies by establishing credible institutional
structures.
Originality/value – This paper contributes to the knowledge on how country-level institutional structures
influence the level of investor confidence in the context of Afric
